Mining glossary
FORK - what is it, how does it happen, and why is it needed?

A fork is a significant change made to a decentralized system's source code.

The cryptocurrency system has a simple and, at the same time, complex structure. One of the concepts that traders and investors regularly use is Fork. This is usually done to adapt the network to the current preferences of the community, as well as to optimize the system for changing technical requirements. Forks are common occurrences on large networks such as Ethereum and Bitcoin. As a result of modernization, fundamentally new cryptocurrencies emerged.

A striking example of a fork is the creation of two fundamentally new cryptocurrencies (BSV and BCH), which arose due to disagreements between community members and changes to the source code. Simply put, a fork can be considered a change intended to change the source code, specifically to create new digital coins.

Features of network changes

Considering the uniqueness of the cryptocurrency system, which is precisely the open source code, any changes are made according to a specific algorithm. Initially, all proposals for improvements and modernization are submitted for consideration, and up to 90% of community members must approve the proposal to implement new protocols. Moderators have the right to make minor changes by notifying participants without waiting for their confirmation.

Technically, when any changes are made, a new blockchain is created. At the same time, nodes are updated with updates for all miners and validators. If not all participants support the changes, then some remain on the old algorithms, while others update the database and work on new protocols.

The main reasons why a fork is performed:

  • introducing approved changes proposed by system participants;
  • improvement of the system and its technical optimization;
  • creation of a new blockchain that will function independently of the parent one.

Types of forks

Depending on the method and result achieved in the process of forks, the following types are distinguished:

  • software;
  • hard.

Software is minor network updates that preserve the basic appearance and functionality of the network. Hard is an irreversible change in which elements of the new system cannot be integrated into the previous network.

Earnings on forks

Even though a fork is a technical change, it can improve the network's functionality and create new opportunities for earning money. For example, it was in this way that the problem of long transaction confirmation times was eliminated, resulting in traders and investors making payments more actively and quickly, thereby increasing their profits.

Making some changes significantly impacts the value of the cryptocurrency of the system to which the updates are made. In the case of large-scale changes that all community members approve, the cost usually increases before they are implemented and activated.